No to tax breaks for military retirees [Editorial]

Maryland, like the rest of this country, owes its military veterans a debt of gratitude. Not just those who were wounded in the armed conflicts of recent years but everyone who ever wore a uniform of the armed services of this country.

From the volunteers who greet returning military at Baltimore-Washington International Thurgood Marshall Airport to the local employers who give hiring preference or discounts to veterans, we would not begrudge them a thing. Words alone are inadequate to express our thanks, and we believe the federal government has a solemn obligation to ensure that their needs, particularly in health care and the transition to civilian life, are met.

But one of the latest proposals to emerge from the candidates running to be Maryland's next governor — to eliminate state taxes on military pensions — is not the right way to go about helping veterans. Not because they are undeserving of the money but because picking certain individuals for an income-tax cut based on their career choice is a fundamentally flawed approach to the tax code.

It's wrong because, first, retirees with career military service are already, on average, better off financially than the average Maryland retiree and because, second, where should such beneficence end? Police officers, firefighters, teachers, paramedics, correctional officers, many have performed extraordinary service on the public's behalf. Where is their piece of the action?

That this proposal came from Lt. Gov. Anthony Brown, a colonel in the U.S. Army Reserve who served in Iraq, means it ought to be taken seriously. Surely, it was a familiar concept, as former Gov. Robert L. Ehrlich Jr. proposed a similar tax break when he ran, unsuccessfully, against Mr. Brown and Gov. Martin O'Malley in 2010. Of course, the Democratic administration demonstrated far less interest in it at the time — just as it failed to support a similar plan offered in the last regular legislative session by Republican Del. William J. Frank, which died in the House Ways and Means Committee without so much as a vote.

According to the Department of Legislative Services, Delegate Frank's bill would have eventually cost Maryland $70.6 million in reduced tax collections annually when fully phased in — $43.3 million for the state and $27.3 million for local governments. Mr. Brown says his efforts would be more slowly phased in and less costly, as he would cap the benefit at $150,000 per year (although it should be noted that the average military retirement benefit was between $26,070 and $29,038 in 2011, according to the Defense Manpower Data Center).

Making retirement more affordable is certainly a laudable goal, but as was noted when a task force studied the issue in 2003, career military pensioners receive about $30,000 more per year than Maryland's average household income — and that was more than 10 years ago. If Annapolis is in the business of handing out tax breaks, shouldn't the elderly who can't afford to retire at all have a premier position in line?

Again, that's not to suggest military retirees are undeserving, nor even that a state with a $37-billion budget can't find a way to afford the expense. But it should also be noted the state projects a tax revenue shortfall in the next budget year and federal sequester cuts may worsen the situation and cost the state thousands of jobs. Rest assured, Maryland will already be cutting government spending, but how deep is it prudent to go?

It's always tempting for candidates to carve out special benefits for small groups, and few are more sympathetic than the nation's veterans. But this is a slippery slope, and it strikes us as far more productive for our elected leaders to pressure Washington to get the U.S. Department of Veterans Affairs in order first — particularly the ridiculously long waits for disabled benefits that have long plagued the agency.

Meanwhile, it's just not good policy to drop tax rates for the more affluent at the expense of everyone else. Maryland already exempts the first $5,000 of military retirement income from taxes (there's even a larger exclusion for the disabled) and it would be more than reasonable to adjust that modest benefit annually for inflation. That might not rally veterans to the candidate's side next year, but it would be the responsible thing to do.

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